The Irish Times reports today that the University of Limerick has installed a fully operational virtual trading floor. The floor has 24 computers (starts at about 1:25 mins – gotta love the dramatic Gladiator-like background music) with all of the data needed to simulate trading at an investment house. Unfortunately, there is one thing missing – providing students with the experience of putting real money at risk, both their own and that of other investors.
In typical hyperbolic fashion, the current chairman of Thomson Reuters, Mr. Niall Fitzgerald (ex CEO of Unilever, who I’m sure is no stranger to trading and hedging in commodities) states that the only thing missing was “the adrenalin rush that comes from realising you’ve lost €50 billion rather than €5 billion”. That is indeed missing, but in reality the majority of people training in this virtual trading floor (and others like it) will never be putting 5 billion of anything at risk, probably not even 5 million. But it is a huge gap in the training provided by this type of service. One year of consistent virtual trading is probably worth less than one day of trading with real money on the line – either your own or the capital of other investors.
Mr. Fitzgerald, in his speech for the opening of the virtual trading facility, had some harsh words to say regarding the recent financial crisis being caused in part by “trading for trading’s sake”. These views are no doubt founded on his vast experience in the business world. However, the Masked Financier would venture that it is more likely that it was “trading for option-like huge monetary upside with no downside” that is perhaps closer to the mark regarding the trading aspects of the recent financial crisis. Mr. Fitzgerald does point out correctly that it was a lack of knowledge of trading activities at the top of major financial institutions which led to the huge build up of hidden trading risk. However, trading is something that many non-financial companies engage in en masse (like Unilever for example) and Mr. Fitzgerald correctly points out that trading is an important part of running many businesses.
However, from the Texas Holdem Investing perspective, the most interesting piece of the article comes at the end.
A trader from Susquehanna states that any aspiring trader should also try to become a good poker player. The Susquehanna trader proposes that putting this on a CV or resume will help to show that in addition to virtual trading experience, an aspiring trader can also demonstrate skill and success in putting money at risk – their own money, and winning. Another Susquehanna trader also features on the video about the virtual trading floor (about 2:15 min). It also turns out that Susquehanna is an investor in UL’s virtual trading floor (whatever that means exactly by being an “investor” in a college facility).
Susquehanna is a major global trading firm founded by Jeff Yass and five other partners. Poker is an integral part of training, work, and life as a trader at Susquehanna. Recently Susquehanna hosted a poker tournament in Ireland to help identify new trainee traders for its European headquarters in Dublin. A major reason for this approach is because one of the core beliefs at Susquehanna is that the skill sets for poker, investing, and trading are similar.
As noted on this site previously, playing Texas Holdem Poker can provide a large amount of risk taking experience in a short space of time, since one can play many more hands of Texas Holdem in a college day compared to the likely amount of virtual trades that could be executed. So, the question from The Masked Financier is: why not have a real poker room as part of the new UL virtual trading room facility, where students would be asked to put up some of their own money in a controlled environment to provide them with real-life experience of taking financial risk.
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